The Third Quarter 2014 Philippine Stock Market Report

Bulls Unleashed

The PSEi was bullish in 3Q14. In the first half of the period, the PSEi was hesitant in breaking the 7,000 mark and retreating to the high 6,000 level. This was the low ceiling we talked about last quarter. Eventually, strong earnings from the previous quarter had first the Bloomberg and then the PSE adjusting their PSEi PERs downwards by 1x. This is equivalent to an estimated 300-point upside which the market did snap up in the second half of the period. Funds still flowed to the Philippine stock market despite its PER of 21x compared to its neighbors with 10x to 18x PER (HK, China, Singapore, Malaysia, Thailand in that order). Fed Chairman Janet Yellen’s advise of upcoming QE tapering fell into deaf ears, and the market was bullish. It even went to an all-time high of 7,414. The previous all-time high was 7,404 in May 2013. The rally to 7,414 was on euphoria that corporate earnings and GDP up to 4Q14 can ease the PSEi PER again and justify the Philippine stock market at a minimum of 22x PER.

PSEi 3Q14

3Q14 was a season to take profits for us. Our favorite sleepers like GTCAP, FGEN, FPH, ORE and other stocks rallied in the quarter to provide favorable gains. At 7,200, Philippine stocks with 60 in our coverage have dried up of value. By value, we mean fundamentally sound stocks at bargain prices. It was harvest time, a season of picking the fruits of our stock investments. At this point in time, bargains are mostly made up of third-liners or small cap stocks. These are good for retail investors rather than institutional ones.

The PSEi still has upward momentum especially before earnings season from October to November. Weighing it down is rising inflation and QE tapering effects from the US. To us, as long as there’s nothing to buy, we won’t buy. We don’t chase prices and position at high valuations. We grow trees, not bonsais. Small caps are also as good as mid or big caps as long as they have value. The gains we pocketed in 3Q14 will all be reinvested when the bears all come out from hibernation. That’s just us.

From stock portfolios introduced in the beginning of 2014, the leading stock portfolio in 3Q14 was the High-Dividend Stocks Portfolio. Aside from outperforming the PSEi, it generated a cash dividend yield of 2.68%.

High Dividend Stocks Portfolio


The Philippine Stock Market Research report is solely for information. It should not be constituted as an offer for solicitation for the purchase or sale of securities mentioned. The information herein has been obtained from sources believed to be reliable. Whilst every effort has been made to ensure accuracy, we do not guarantee the accuracy or completeness of the report. All opinions and estimates expressed herein constitute our judgment as of this date made on a reasonable basis and are subject to change without notice. No liability can be expected for any loss arising from the use of this report or its contents. As this is general information, it does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may obtain this report.